Merriman, LLC

At Merriman, we often help our clients plan for more than just retirement. One topic that commonly comes up is saving for college. My colleague, Lowell Lombardini Parker, wrote about the various college savings options in an earlier post, and this three-part series will focus specifically on the 529 plans highlighted in his article. Part I will review 529 plan basics; Part II will evaluate Washington’s 529 prepaid tuition plan, known as the GET; and Part III will take a look at the best 529 savings plan we know – the West Virginia Smart529 Select. (more…)

Recently, my daughter’s preschool put on an emergency preparedness seminar. Preparing for a disaster of some kind has been in the back of my mind for a while, but I hadn’t really given it my full attention until I was listening to the Red Cross representative walk us through possible scenarios and realized how entirely unprepared my family is.

Just last week, local news stations shared a warning from the U.S. Geological Survey: There is an 84% chance of a 6.5 magnitude earthquake in Seattle in the next 50 years. Our office is certainly prepared for an event like this — we have trained floor wardens, supply kits in the office and plans for running operations in the event of a disaster — but at home, I’m not nearly so prepared. (more…)

High school seniors are now in the process of getting acceptance letters to colleges.

When the thick envelope comes, there will be well-deserved joy, possibly followed by the dismaying thought on how to actually pay for those four expensive years.

Hopefully, parents will have done some advanced planning and saving for this major event. There are various strategies which can substantially ease the financial burden of higher education, some of which should be started many years before high school.

Background

Before we discuss strategies, let’s review some key terms, as they say in school.

There are two major financial aid forms which could be completed. The first is FAFSA, the Free Application for Federal Student Aid. This has to be submitted to be considered for any federal financial aid. It can be completed as early as January of the child’s senior year in high school. FAFSA assumes that 5.64% of parental assets can be used to fund annual college expenses, while the assessed rate on the children’s assets is a much higher 20%.

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Editor’s Note: Below is an article published first at MarketWatch that was written by Elaine Scoggins, CERTIFIED FINANCIAL PLANNER^(TM) and director at Merriman

Early in my career, I knew a wealthy man who took his own life. He left a suicide note saying he was pushed to the breaking point trying to pay back some sizeable business and personal debt.

From the outside, he appeared to have it all: a successful business, a beautiful new luxury home, expensive vacations and a wonderful, loving family. But, like with so many people we’re impressed by, no one knew about the dangerous levels of debt he’d taken on in order to have all those things.

I use this story knowing it is an extreme case. Debt, in the right amounts and at the right times in our lives, can be very beneficial in helping us get ahead. But if you get into a situation where you can’t pay it back, it can turn out to be one of the ugliest nightmares you’ll ever face.

You might think that if the lender says you’re fine to borrow the money, it must be OK to proceed. But there’s one gigantic problem with those income and debt ratios that are commonly used to screen us all before we borrow: They assume nothing in your life is going to change.

Taking the time to honestly answer these five questions could save you from years of misery.

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A couple recently asked my advice about how to put aside money for their new grandson, money he could use in his retirement. They didn’t have much money, but they wanted to get an early start.

I suggested a variation of an old formula that calls for setting aside $1 a day starting when you’re born. Babies can’t do this for themselves, but grandparents can. I told them that if they put aside $1 a day until their grandson’s 18^th birthday, in theory, that money could grow to $1.5 million by the time he reached 65.

They could save $365 during their grandson’s first year, then add the same amount on every birthday until he reached 18.  Their total investment: $6,935.

It’s not easy to invest $365 efficiently, but exchange-traded funds (ETFs) don’t have minimums. If they could earn 10 percent, they could turn this money into more than $16,000 by their grandson’s 18^th birthday. (more…)

With cell phones, email and internet at your hip, how do we teach our children we can’t get everything by pushing a button? How do we raise patient children when things are so available and instant to our children? My wife and I have struggled with these questions. (more…)

In today’s competitive job market, saving for your child’s higher education is as important as ever. Although there are not an overwhelming number of savings choices, the subtleties between them are paramount. Below you will find what we at Merriman feel are the most important distinguishing characteristics between 529 plans, Coverdell ESA’s and UGMA/UTMA accounts.To find out why we favor using a 529 plan read the article “Saving for college just got better,” by Rich Buck.

The Sesame Street gang also spends time talking about want versus need. My brother started to teach this concept to my nephew when he was between 3 and 4 years old, and now at 5 he truly “gets it.” It doesn’t mean that he doesn’t feel he really NEEDS that new Star Wars Lego set at times, but when asked if he really does need it, he will admit he actually just wants it.

I’m as guilty as the next person of spoiling my nieces and nephew by being more than happy to buy them anything their hearts desire. But I have learned to hold back as I have seen the consequences of this behavior in many teenagers and young adults coming out of college in to their first jobs.

I hope you find The New York Times article informative and that you begin to expose kids as young as 3 to the concepts of want versus need as well as spend, share and save. You will be setting them up for success in the long run.

This article in The New York Times (Lewin, Tamar, “Burden of College Loans on Graduates Grows”, April 12, 2011) speaks about the growing total level of college debt, which is a function of increasing college costs, increasing numbers of students going to college and the increasing numbers of those students who need to borrow to attend school.

The article goes on to state that two-thirds of those who received bachelor degrees graduated with debt in 2008, compared with less than half in 1993. In 2010, the average loan amount for those graduates finishing college with debt was $24,000.

Attending college is great for its own sake, and also leads to substantially higher lifetime earnings and lower unemployment. However, both parents and students should consider the incremental costs and benefits of attending, for example, an expensive out-of-state private university instead of an in-state public university. Both might give the student a fine education, with good prospects for future potential graduate schools and/or jobs.

The private school might have more prestige.  The question is whether this is a sufficient inducement to incur large amounts of debt which could negatively impact the retirement plans of the parents or the future lifestyle of the student. There is no right answer to this, but it is certainly something our clients can discuss with their financial advisors.

Say it out loud: “Today I will schedule a time to talk with my insurance person about an umbrella insurance policy.”

Why?  Soaring healthcare costs and the lawsuit-crazy world we live in certainly can put you at risk of exceeding your liability limits on your home and auto policies.  An example: you are driving and slide on some ice and strike another vehicle and the driver of that vehicle suffers a broken arm.  You would think your auto policy liability coverage should be enough, but in this case the driver is a surgeon who can’t work for 18 months.  You could end up with liability above what your policy pays.  This is where the umbrella policy will step in and cover much higher limits. Typically, people will get coverage of $1-2 million, depending on their lifestyle.

Umbrella insurance policies are inexpensive assuming you have adequate limits on your existing policies.  It will be a good opportunity to review all your liability limits and make appropriate changes to protect your assets.   A competent insurance person can help guide you in determining the best coverage for your situation.

Schedule it today!